Michael McKenna of the National Credit Union Administration

Michael McKenna, the former general counsel of the National Credit Union Administration who retired suddenly Nov. 19, quit after learning he was under investigation for ingesting marijuana, drinking heavily and visiting strip clubs during work hours with his deputy general counsel, Lara Daly-Sims.

Corporate Counsel wrote about McKenna's sudden departure last November, but at the time no one mentioned the ongoing investigation into the pair.

The Inspector General's report was made public late last week. It says the agency's two top lawyers visited strip clubs during work hours seven times—four of them to a club named Camelot in Washington, D.C.—over a 22-month period, for three to four hours at a time. They had several drinks each time.

Two other times, the report says, the lawyers went out drinking during office hours but not to strip clubs. One time on a business trip to New York they shared edible marijuana. Daly-Sims has since hired her own lawyer and accused McKenna of sexual harassment. McKenna could not be reached for comment.

In a statement, National Credit Union Administration chairman Rodney Hood said, "I was surprised and disappointed to learn of the activities described in the report. They are unacceptable and do not represent the values of this agency … Harassment and misconduct have no place at the [agency]. These types of behaviors are unacceptable and will not be tolerated."

He said the agency is evaluating the organization's policies and processes for reporting allegations and is taking additional actions, including asking the board "to create an office of ethics counsel, supplementing our existing anti-harassment training programs, and offering additional third-party counseling services to employees."

Daly-Sims referred questions to her attorney, Cathy Harris, of the D.C. employment law firm Kator, Parks, Weiser & Harris. Harris told Corporate Counsel on Monday that Daly-Sims reported the sexual harassment to a manager Nov. 15, "which launched the IG [Inspector General] investigation."

Harris said Daly-Sims later initiated an Equal Employment Opportunity complaint Dec. 2 and the matter is still pending.

"We are dismayed that the IG investigation failed to mention or investigate her complaints of sexual harassment," Harris said. "We are appalled that the IG publicly released a report with the name of a sexual harassment victim without her consent."

According to the 12-page report, Daly-Sims resigned her position Jan. 10, and on Jan. 27 declined to participate in a follow-up interview about discrepancies in her time sheets. She has since joined the D.C. office of Chapman and Cutler as a partner in its asset securitization department.

Daly-Sims worked at the National Credit Union Administration for eight years, and the report says she believed McKenna was helping her to become general counsel when he retired. She previously served as a counsel at the Federal Deposit Insurance Corp. and as a partner in the structured finance department at Orrick, Herrington & Sutcliffe.

The report also accuses Daly-Sims of working only four or five hours on many days while collecting over $125 an hour for full eight-hour days. It says she did not work some 374 hours claimed on her time sheets, not counting the strip club visits, amounting to nearly $47,000 in overpaid salary.

The report states that the U.S. Attorney's Office for the Eastern District of Virginia declined to prosecute McKenna and Daly-Sims. The administration, an independent agency formed by Congress, is based in Alexandria, Virginia.

The report was written by Marta Erceg, a counsel to the inspector general of the U.S. Department of Education for 11 years. Erceg did not immediately respond to a request for comment.

As for McKenna, the report states that when he was interrogated Nov. 18, he at first denied and then confirmed many of the details that Daly-Sims reported. The next day executive director Mark Treichel informed him that the board would probably place McKenna on administrative leave. Two hours later, McKenna announced his retirement.

Deputy general counsel Frank Kressman was named acting general counsel while the agency searches for McKenna's replacement. Kressman joined the agency in 1998 as a staff attorney. His previous experience includes work as an attorney at the FDIC and the Commodity Futures Trading Commission.

McKenna, who was appointed general counsel in 2011, was a 30-year veteran of the department. He joined the agency in 1989 as an attorney and served as senior policy adviser for two administration board members in 2001 and 2002.